Our business climate must encourage business location and expansion

Jacob Luecke

4 years ago

Ribbon cuttings and announcements by state officials herald most relocations and expansions. However, the Missouri Chamber recognized that we should also be looking at the companies that considered coming to Missouri but chose not to.

To learn more about the companies that got away and to identify effective reforms that the Missouri Chamber should tackle, we commissioned Gallup to conduct confidential interviews with site selectors from around the nation.

Transportation, operating costs, and labor environment were the three biggest factors considered by the site selectors interviewed.

“Especially in manufacturing, its 65 percent logistics and supply chain dynamics,” one site selector said. “Customers are expecting their goods faster and faster, and shipping times are decreasing. We need access to key markets through freight delivery.”

Workforce is another concern. Missouri’s workforce has always been a competitive advantage, but site selectors warned that Missouri must work to protect that advantage.

“The labor advantage Missouri had is beginning to erode; we need machinists, welders, maintenance technicians that are experienced. Demand is outstripping supply,” one site selector said. “We are not effectively promoting the social and economic value of industrial careers. We need a PR campaign to show students that this is a cool thing to do.”

Available training is another measure site selectors use to weigh workforce strength. One site selector suggested that Missouri adopt a training grant program: “Georgia, Alabama, North Carolina, South Carolina and Tennessee all have model training grant programs.”

According to site selectors, our right-to-work status is also holding us back: “Missouri’s prospect flow on manufacturing is only 60 percent of what it would be if it was right-to-work.”

Tax policy is another area to improve. One site selector suggested keeping the corporate tax rate under 5 percent.

“Missouri is a moderate tax state. It’s not bad. Actually, it’s pretty darn good,” one site selector said. “Right now, you need to reduce or eliminate the sales tax on all business equipment. Without questions, you have to exempt data centers and manufacturing.”

Site selectors were generally complimentary of Missouri’s incentive programs, but they shared concerns about the administrative burden of accessing these funds.

“Administratively, Missouri has one of the most complex incentive systems in the country,” said one site selector. “The time and effort that goes into applying for the incentives can neutralize the value of the incentive package except in very large deals.”

Missouri does well at attracting projects that are capital intensive but may be missing out on smaller projects because of red tape.

In spite of site selectors’ suggestions for improvement, companies such as New Jersey’s GAF Roofing are choosing to locate here.

The nation’s largest roofing manufacturer plans to build a new $149 million, 320,000 square-foot manufacturing plant in Moberly in 2015. The project will create 125 new jobs.

“By investing in Missouri, GAF gains access to a low-tax climate and experienced workforce that will help our business thrive,” says Bob Tafaro, GAF president and CEO. “We look forward to serving as a catalyst for economic growth and job creation in the state moving forward.”

Business expansion

In addition to encouraging location here, the business climate needs to support expansion of companies already working here.

In 2014, Leggett & Platt began a $5.1 million expansion at its Carthage manufacturing facility. The company, which was founded in Carthage in 1883, has strong ties to our state, and company officials have a desire to keep the new jobs in Missouri.

“Leggett & Platt began in Missouri, and we want to grow here,” says David S. Haffner, CEO and chairman of the board of directors.

The company began making steel coil bedsprings in Missouri, and over time, it diversified into manufacturing a broad range of products used in homes, offices, and vehicles. However, Leggett & Platt’s decision to expand its Carthage Flex-O-Lators production plant was based on more than loyalty.

A global company like Leggett & Platt can move production facilities anywhere, and as competition grows more intense, these companies must constantly weigh the business climate in which they operate. Despite existing relationships, expansion decisions often come down to a company’s bottom line.

John Sondag, president of AT&T Missouri, attributes his company’s investment in Missouri to the state’s strong business environment. In the past four years, AT&T has invested about $2.5 billion in the state.

“While AT&T is making investments in many states, Missouri is getting a slightly larger percentage per capita,” Sondag says. “Missouri’s strong business climate is the primary factor behind that decision. A state’s commitment to its business climate is what companies look for when expanding.”

Climate for growth

The Missouri Chamber plays a key role of monitoring the state’s business climate and advocating for legislative and marketplace reforms that keep it strong. Building a more competitive business climate is a key tenet of Missouri 2030, our 15-year strategic plan.

Actionable items were gathered from Gallup’s analysis and will be included in the Missouri Chamber’s legislative agenda. Staying in close contact with site selectors will also be an ongoing emphasis of Missouri 2030.

“Holding the line on taxes and bottomline employer expenses such as litigation burden, workers’ compensation, and unemployment insurance will continue to be a critical part of the Missouri Chamber’s mission,” says Missouri Chamber Chairman Dirck Clark. Clark is the chief strategy officer for St. Joseph-based Heartland Health/ Mosaic Life Care.

Advocacy of these issues has been a longstanding strength of the Missouri Chamber, Now, more than ever, the Missouri Chamber must use its muscle to protect and improve Missouri’s competitive advantages.

“No doubt about it, the Missouri Chamber is one of the strongest lobbying forces at the state capitol,” Clark says. “That will continue, and the Missouri Chamber legislative team will be even stronger armed with new resources and research through Missouri 2030.”